COVID-19 UPDATE: Wave 3 seems to be plateauing, but the holiday season still ahead. Favorable equity seasonals start 12/15...

Click HERE to access the FSInsight COVID-19 Daily Chartbook.

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Joining us for a webinar, which will include the Fundstrat Macro Team.  The following topics will be discussed:   

• Overall macro and strategy outlook 2021
• Economic outlook, what can we reasonably expect for GDP growth?
• Where are we in this investment cycle and what themes will dominate?
• We discuss key policy risks and upsides 
• New investment themes
• Full EPS and sector outlook
   
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STRATEGY: December seasonals should be starting on 12/15/2020
The rate of increase in COVID-19 cases is slowing.  And the Thanksgiving week created distortions:
– week of Thanksgiving looked artificially good (closed labs/offices)
– week post-Thanksgiving look artificially bad (payback)
– we are now 14-17 days post-Thanksgiving

So this week’s slowing could be a distortion, because we are comparing it to the prior week.  And that prior week contained a lot of Thanksgiving cases.  Is this confusing? 

What I am saying is that cases this week (+2 weeks after Thanksgiving) are still growing faster than a mega-catchup week (+1 week after Thanksgiving).  So until we see a sustained period where 7D delta is negative, we think it is hard to say Wave 3 is even close to peaking.  But at the state level, about 1 in 5 US states is seeing COVID-19 contracting.  And two weeks ago, there was only 1 state.  So there is some progress.

Source: COVID-19 Tracking Project and Fundstrat


Equity markets have stalled in the past 5 trading days, but the month is only half completed…
The fact that S&P 500 opened higher Monday but closed lower, is not a particularly encouraging sign for December.  But given headlines around Washington fiscal relief package were in headlines today, likely contributed to investors engaging in a mini-“buyers strike.” 

The positive seasonals for December are likely only just starting. Ryan Detrick, of LPL Financial, posted a daily composite chart for December (1950 to now) and it shows that the positive seasonals for December start mid-month (see below).

– Since 1950, the seasonal surge in December period starts 12/15, or Tuesday
– strong markets finish strong, so this would be consistent with our view that stocks are strong into YE

Source: twitter.com


In the past week, equities have stalled.  After reaching an all-time high of 3,712 on 12/8/2020, stocks have been chopping lower.  In this same period of time headwinds have emerged:

– fiscal relief package remains mired in Washington
– Brexit risks loomed (last week)
– IPOs of Doordash + AirBnB were large increases in supply and their initial surge raised alarms about excessive speculation
– Tesla announced a large secondary (supply)
– COVID-19 vaccines started rolling out in the US (sell on the news)
– more investors are suggesting stocks are topping, as they have moved so much faster than fundamentals

So again, we can see a pretty sizable wall of worry.  And as shown below, the S&P 500 in December 2020 does look a lot like the 70-year composite (see both are below).  

Source: LPL and Bloomberg




Epicenter Trifecta list
Below is our current “Trifecta” epicenter stock list.  These are the stocks which were hit the hardest by the pandemic and have the greatest operating leverage to a re-opening.  And we like the earnings upside in these stocks, because of the massive cost reset.  The stocks are based on positive views coming from the trifecta of: (i) Quant (tireless Ken), (ii) Global Portfolio Strategy (Brian Rauscher, aka Rocky) and (iii) Technicals (Rob Sluymer).  

Source: Fundstrat, Bloomberg

ADDENDUM: We are attaching the stock lists for our 3 portfolios:
We get several requests to give the updated list for our stock portfolios.  We are including the links here:

– Granny Shots  –>       core stocks, based on 6 thematic/tactical portfolios
– Trifecta epicenter  –> based on the convergence of Quant (tireless Ken), Rauscher (Global strategy), Sluymer (Technicals)
– Biden vs Trump  –>   based on correlation to either candidate odds

Granny Shots:
Full stock list here –> Click here
Tickers: AAPL, AMZN, AXP, BF.B, CSCO, EBAY, GOOG, GRMN, GWW, INTC, KLAC, LEN, LOW, MNST, MSFT, MXIM, NVDA, OMC, PM, PYPL, QCOM, TSLA, XLNX

Trifecta Epicenter (*):
Full stock list here –> Click here
Tickers: AN, GM, F, HOG, GRMN, LEG, TPX, PHM, TOL, NWL, HAS, MAT, PII, MGM, HLT, MAR, NCLH, RCL, WH, WYND, SIX, DRI, SBUX, FL, GPS, LB, CRI, VFC, GPC, BBY, FITB, WTFC, ASB, BOH, FHN, FNB, PB, PBCT, RF, STL, TFC, WBS, PNFP, SBNY, NYCB, MTG, AGNC, EVR, IBKR, VIRT, BK, STT, SYF, BHF, AGCO, OC, ACM, WAB, EMR, GNRC, NVT, CSL, GE, MMM, IEX, PNR, CFX, DOV, MIDD, SNA, XYL, FLS, DAL, JBLU, LUV, MIC, KEX, UNP, JBHT, R, UBER, UHAL, HP, NOV, SLB, EOG, PXD, HFC, MPC, PSX, XEC, LYB, EXP, MLM, CF, MOS, ESI, NEU, NUE, RS, SON, STOR, HIW, CPT, UDR, KIM, NNN, VNO, JBGS, RYN

Biden White House vs. Trump White House:
Full stock list here –> Click here

(*) Please note that the stocks rated OW on this list meet the requirements of our investment theme as of the publication date. We do not monitor this list day by day. A stock taken off this list means it no longer meets our investment criteria, but not necessarily that it is neutral rated or should be sold. Please consult your financial advisor to discuss your risk tolerance and other factors that characterize your unique investment profile.

POINT 1: Daily cases 192,177, +6,853 vs 7D ago.  Wave 3 7D delta slowing ~8 consecutive days
The latest COVID-19 daily cases came in at 192,177, up +6,853 vs 7D ago. 

– Daily case growth, measured as 7D delta, seems to be slowing
– For ~9 days now and maybe as much as 11 days, the 7D delta is flattening
– Now it is +6,853
– But we are still in the holiday season, so the threat of renewed spread is high

Source: COVID-19 Tracking Project  and Fundstrat


7D delta at +6,853…Wave 3 momentum still slowing
Again, the daily change vs 7D ago, in our view, is the leading indicator as it is what influences the 7D moving average. 

– the 7D delta is falling for ~9 consecutive days now, maybe as much as 11 days
– but we are still in a period of distortion from post-Thanksgiving
– plus, we are still in the holiday season, so renewed spread is a risk
– this week will provide a much clearer picture

Source: COVID-19 Tracking and Fundstrat  



CA remains the state with the highest daily count in cases and also among the biggest 7D jump in cases.  But COVID-19 is pretty bad everywhere.

 

 
Source: COVID-19 Tracking and Fundstrat  


Is CA finally peaking?  Hopefully….

Source: COVID-19 Tracking and Fundstrat  



POINT 2: Wave 3 –> some states are indeed seeing COVID-19 retreat decisively
Wave 3 remains underway in the US and the magnitude of cases is simply alarming.  I am hearing from more and more friends out in the Northeast of close relatives contracting COVID-19.  Some with severe symptoms and outcomes, so I don’t think COVID-19 is necessarily behind us.

But at the start of Wave 3, 6 states were the ‘bleeding edge’ as these states had the worst case growth and high prevalence.  And periodically we looked at the county-level data within these 6 states (WI, ID, IL, ND, SD, UT, or WIINSU) to see how cases were tracking.  Below is the latest update:

– 5 of the 6 states are showing decisive signs that COVID-19 cases are rolling over in these states
– interestingly, 4 of them peaked at a similar ‘case velocity’ of ~2,000 daily cases per 1mm (OK, one was 1,500).

Source: Johns Hopkins and Fundstrat


But Wave 3 is only ending when more states see similar rolling over trends — this is not happening yet…
We can only see evidence Wave 3 is rolling over, however, when more counties report a decline in cases vs 7D ago.  Below is the latest national county-level data.  
– the line is % of USA with 7D delta<0 (14D mavg)
– 7D delta <0 is cases declining
– Currently, this figure is only 22%
– It has risen from 5% a few weeks ago

So if this line manages to rise this week, then it could be a sign that Wave 3 is peaking.
– But to me, it is still too early to make that call
– Holiday season = close gatherings = higher risk

Source: Johns Hopkins and Fundstrat




POINT 3: Oura wearable might detect COVID-19 before someone realizes they are infected
As vaccines get rolled out across the world, tools that can detect and prevent COVID-19 are still important — at least until the world reaches herd immunity.  And while fast testing is important, it would be helpful for individuals to have their own personal ‘early warning’ system.

Could a consumer product, called ‘Oura’ ring be useful? Maybe.

The Dailycaller.com reported on a study conducted by UC San Francisco and UC San Diego, which gathered data from users of an Oura ring.  This was originally published in Scientific Reports.  The authors concluded that the ring was able to recognize COVID-19 infected, even when the actual user did not even think they had the infection.

https://dailycaller.com/2020/12/14/study-rings-detect-coronavirus-in-wearer-before-symptoms-show/


The original study was published on Sunday, December 14th.  The first page of this study is shown below.  And it suggests that this device might detect COVID-19 better in cases where the infected has ‘subtle’ or mild symptoms.

https://www.ucsf.edu/news/2020/12/419271/wearable-sensor-may-signal-youre-developing-covid-19-even-if-your-symptoms-are


I recall the founder of Oura speaking on national media (CNBC maybe?) talking about how they believe their rings could detect COVID-19 symptoms effectively.  And I guess this UCSF/UCSD study bears that out.  Below is their device — this gold one retails for $399 and the simpler model for $299.

Source: Oura.com


But the study author’s ultimate takeaway is that Oura wearable measures temperature accurately, and in particular, can potentially detect infection when a person has mild symptoms.  This could be useful and I thought it was worth discussing.

https://dailycaller.com/2020/12/14/study-rings-detect-coronavirus-in-wearer-before-symptoms-show/